Franchise expansion
Franchise expansion regards to a system of business expansion through low capital investment given by franchisees by way of capital. The remunerations of franchising as a means of expanding a business are dual. First is through the Franchise giving capital and by franchising the business. Therefore, the franchisor dedicates his or her business in the hands of individuals who are motivated to enhance to success. This paper is a business plan on restaurant. It will consider a business card, menu and other relevant company tools. The purpose of the business plan is to establish a large number of outlets in a short duration for a rapid expansion of the company.
In the restaurant industry, franchising minimizes monitoring costs as they expand into new and distant markets. The employees in this firm are to be hired to undertake various activities that the entrepreneurs themselves do not have time to undertake. Through hiring new employees, it may increase adverse selection and moral hazard. Agency theory suggests that the more units in the system, the harder it is to monitor and control units, and the more likely firms will engage in franchising. The sources of opportunity in this company includes catering services for customers not only within the immediate environment but also various visitors and tourists in the tourism industry (Hsu, 2007, p. 76).
Recommendations
Recommendations on an entrepreneur concerning various risks that may face the restaurant industry include; cultural differences. This is in respect to various communities regarding their beliefs and traditions. Thus, in the industry should take into consideration the various aspects such as tradition, culture, and religion of various communities. The cultural effects may also increase the cost of gathering information. In addition, the industry encounters two types of costs when they own their own foreign units. First, emigrant managers are themselves a considerable cost. They are paid a premium as compensation to their families to various cultures. Cultural differences might mean that expatriate managers cannot adapt to serve the local preferences in the restaurant industry. It is also important that the entrepreneur notes that franchised restaurants in the restaurant industry are more likely to involve in foreign expansion than non-franchised firms (Greiner & kinni, 1999, p. 102).
Expanding restaurant industry through franchising
For an entrepreneur expanding the restaurant industry business through franchising, it is important that he considers increasing the cost of a foreign operation. This is because, in international operations distance and time increase the level of uncertainty due to the information gap. In a franchise agreement, the franchise purchases the right to profit from a particular unit by paying franchise fees and royalties to the franchiser. The restaurant industry can also be expanded using owner managers who can bear the residual risk of the local operation in the industry. Franchise will add attraction of the restaurant industry into foreign markets especially those who are different regions. Through indigenous franchise, the restaurant industry, the franchise will be able to attract the local market into the industry. Therefore, franchise application in a restaurant is most effective when major aspects like foreign cost and managerial characteristics are taken into consideration.
Conclusion
In conclusion, franchising will allow the restaurant business to expand limiting the spread of managerial resources across too many restaurant units. Restaurant franchise system requires less management than a company owned series of outlets. However, it is important to note that hiring, motivating, training, and retaining competent staffing is an aspect handled by franchise.
References
Hsu, L. (2007). The Franchise Decision and Financial Performance: An Examination of
Restaurant Firms. ProQuest Publishers.
Greiner, D. & Kinni, T. (1999). 1,001 ways to keep customers coming back: wow ideas that
make customers happy and will increase your bottom line. Prima Pub Publisher.
